Making the Most of the Money You Have

Here's a great piece by Laura Rowley on making the most of the money you have. It's full of very interesting information on what people think about money -- much more than I could cover in one post. But I'm going to hit the highlights and comment on the parts that really hit home for me. Here goes:

Nearly 80 percent of U.S. adults say they need more money to feel financially comfortable, and more than a quarter would have to double -- or more than double -- their current income to achieve that goal, according to a new Yahoo! Finance/Harris Interactive survey.

Ok, think about this. We live in the most prosperous nation in the world. Many of the poor in America would be at least middle class in a vast majority of the rest of the world. Yet 80 percent (80%!!!!!!! Not 10%, not 15% but 80%!!!!) say they need more money. Yikes!!!

My opinion is that very few people can separate needs from wants. Most people think that a big screen color TV, a house of a certain size, vacations of a certain caliber, cars (plural) of a specific quality and on and on are NEEDS when they are really WANTS. For instance, you need transportation to get to work, and a small, used car can work for this. But you may want a brand new, gas-guzzling SUV. I believe most Americans can't separate the two in their minds, they buy to the wants, and thus they are in financial difficulty and NEED MORE MONEY.

The truth is, they just need to spend less than they earn. This will put them in a position of financial security.

More than half of respondents don't follow a budget.

Hmmmm. Think this could be related to the topic above? How do people even know they need more money if they don't budget? How do they know where their money is going in the first place?

For those of you who want some budgeting help, check out It's Budgeting Time of the Year.

Studies show that a certain amount of money does indeed make people happier: People who live in wealthy nations report higher levels of happiness than those who live in poor ones.

But excessive wealth seems to raise the happiness bar only slightly. During the 20th century, significant jumps in economic growth and income in developed nations like the United States and Japan have been accompanied by only marginal increases in happiness.

I think we've covered this before. Up to a certain point, more money equals more happiness. After that, more doesn't make you that much happier.

"People always want more money and then, when they get more, they end up wanting more again, because they adapt to the kinds of things they buy," explains Richard Easterlin, a professor of economics at the University of Southern California and a pioneer in the research on well-being.

Hit the nail on the head!!!!!!

Envy is another key factor fueling the drive for more. "Everyone knows what kind of car and house the neighbors have -- it's the invidious social comparison that undermines feelings of well-being in the financial arena," says Easterlin.

Yes!!!! See, this is why I love this piece!!!

"People always have this illusion they'll be happier if they make more money. They end up sacrificing family, health, and everything else to make more money when they'd be better off sacrificing money to spend more time on health and family."

Oh no, now they're getting into our business!

But if you think about it -- even those crazed workaholics out there -- many people do sacrifice everything to earn more and more. Many do it "for their family" -- when all the family really wants is more of them. Men are particularly susceptible to this line of thinking. And before you think I'm being too self-righteous, I'm talking to myself here too. I've been caught in that trap before -- especially in my younger days. I know what it's like.

But if you step back and think about what you really need versus what you want, it can free you up to make better life decisions.

Kasser has conducted a variety of studies that found people who are "time affluent" are happier than those who are materially affluent. "Time-affluent people had more time to spend engaged in activities focused on personal growth, friends, and family and contributing to community" -- all essential factors in happiness, he explains.

Very interesting, indeed. Maybe I should focus this blog on saving you time instead of saving you money. Oh, that's what Lifehacker does.

Meanwhile, experts agree that financial comfort can be achieved by carefully managing the money you have -- something 23 percent of survey respondents said they don't have the knowledge to do.

I'm trying to do my part in eliminating financial ignorance. Though some of you might say I'm promoting financial ignorance with my opinions. ;-)

As I said, this piece has much more to add on these (and other) issues, so if you're interested in this taste I've given you, click through the first link above and read it for yourself.

Comments

[Duane Gran]

Excellent points all around. On the matter of budgeting I've observed that many people do it sporadically and, much like an exercise routine, abandon it once it begins to hurt. A self imposed restraint is the only antidote to endless want.

Truly, this was one of the best posts I've read on the site. Bravo.

[FMF]

Duane -- Thank you. That's a very big compliment coming from someone of your background and experience.

[Sean Hackbarth]

This post shows common sense isn't so common. If more people budget and understand where their money is going they won't work themselves to death and actually have time to enjoy what they're making.